[haha]

I admit that to me "academic finance" is an oxymoron. I think it is very useful if you are designing or selling some sort of leveraged derivative to others, or buying the same strictly with OPM.

I think academic finance is also useful to FPs and other financial salespeople, in that a simplified version of it is easily explained, has authority behind it, and might stand up well in court should the need arise.

But for equity and bond investing of one's own money, I'll take one practitioner with a long history of success over all the academics that might be found at U. of Chicago, MIT, and Stanford together.

Seth Klarman, one such practitioner with a long history of success quoted Wilbur Wright on the process of learning how to fly:

“There are two ways of learning how to ride a fractious horse; one is to get on him and learn by actual practice how each motion and trick may be best met; the other is to sit on a fence and watch the beast a while, and then retire to the house and at leisure figure out the best way of overcoming his jumps and kicks. The latter system is the safest; but the former, on the whole, turns out the larger proportion of good riders. It is very much the same in learning to ride a flying machine; if you are looking for perfect safety, you will do well to sit on a fence and watch the birds, but if you really wish to learn, you must mount a machine and become acquainted with its tricks by actual trial.”

So it is with investing.

Klarman goes on:

For 25 years, my firm has strived to not lose money—successfully for 24 of those 25 years—and, by investing cautiously and not losing, ample returns have been generated.

And

After 25 years in business trying to do the right thing for our clients every day, after 25 years of never using leverage and sometimes holding significant cash, we still are forced to explain ourselves because what we do—which sounds so incredibly simple—is seen as so very odd. When so many other lose their heads, speculating rather than investing, riding the market’s momentum regardless of valuation, embracing unconscionable amounts of leverage, betting that what hasn’t happened before won’t ever happen, and trusting computer models that greatly oversimplify the real world, there is constant and enormous pressure to capitulate.Clients, of course, want it both ways, too, in this what-have-you-done-for-me-lately world. They want to make lots of money when everyone else is, and to not lose money when the market goes down. Who is going to tell them that these desires are essentially in conflict, and that those who promise them the former are almost certainly not those who can deliver the latter?

Those who might be interested can read the whole piece at

http://www.retirerichblog.com/2008/02/investing-guru-seth-klarmans-talk-at.html

Ha